Three ways blockchain can be used to establish best practice

One of the most significant innovations in compliance will come through the incorporation of blockchain. There are three specific areas where I see blockchain directly impacting the compliance profession:

1. Third parties. With blockchain,a business can maintain immutable records of its due diligence process for a specific third party or a specific regulatory review. Due diligence delays would be eliminated by providing immediate and real-time access to the data, collection of information from potential third parties, and analysis of the information. A compliance officer could then move the process forward through verification and validation.

2. Contracts (specifically around compliance terms and conditions). Blockchains certainly facilitate contracting from the compliance perspective. Through smart contracts, companies will be able to automate the compliance terms and conditions of agreements. This means that if a company develops contract programs to run on blockchain, it can incorporate the required compliance terms and conditions and can trigger alerts. This could be expanded to include compliance training, annual certification, or another ongoing obligation.

3. Operationalizing compliance. Blockchain could help to integrate compliance and ethics into the very DNA of an organization, following the prescription of the Justice Department in its Evaluation of Corporate Compliance Programs. Through smart contracts under blockchain, stakeholders will be able to enforce the commitments made. It will be interesting to see when the Justice Department or SEC will begin to comment on blockchain as a part of a best practices compliance program.